As GoL considers benefits of sharing infrastructure with potential miners in Guinea
ArcelorMittal's elaborate plan to expand its iron ore production in Liberia from the current 5 tons to 15 tons per year will require and investment of US$500 million, on top of the US$1.7 billion the company has already invested in the mine. The expansion plan aims to extend the company's Liberia mine life by 27 years and allow it to ship out at least 15 million tons of ore per year for the life of the mine.
According to ArcelorMittal Liberia's chief executive officer (CEO), Scott Lowe, while the Government of Liberia peruses a summary of the company's expansion plan, the company is "working with the government on an amendment to our MDA (mineral development agreement) and we are in discussions about essential infrastructure."
By "essential infrastructure", Lowe is referring to the railroad, which the company built to transport iron ore from its mine in Yekepa, as well as the Port of Buchanan, from where the iron ore will be shipped. Essentially, the company says it needs to convey at least 15 million tons of ore product per year by rail through the port of Buchanan, as the Government of Liberia considers requests from mining interests form just across the border in Guinea, for use of the same rail and port.
"We need to do that to justify that investment. In any business, no investor is going to put money in if there are risks associated in getting the product to the customer," he says.
The single rail line, which runs from Yekepa to the Port of Buchanan, was rebuilt by ArcelorMittal after it was damaged during the Liberian civil war.
"We've had a long history with the rail line," Lowe, who joined ArcelorMittal in March 2019, told the Daily Observer in an exclusive interview on September 4. "We took over in 2005 and there was very little left. The rail line, sadly, had been destroyed by the civil war and by weather and we spent US$700 million to build that rail line up into what it is today. So we think we've earned the right to continue operating and then expand that rail for our business."
ArcelorMittal is not at all opposed to sharing the rail line with another user. In fact, according to Lowe, the company has vast experience operating multi-use, high capacity rail infrastructure.
However, "absolutely essential for this investment decision is the infrastructure, which is the rail and the port for that 15 million tons that we need reserved for us to underpin our investment decision," he said.
"To add on to that additional capacity for ore out of Guinea would be fantastic, with third parties -- we'd support that, as long as it doesn't jeopardize not only our existing business, but our expanded business and creating a better future for our employees.
On September 5, High Power Exploration Inc. (HPX), a United States-domiciled mining company, won the rights to develop the Nimba iron ore deposit in Guinea, previously held by BHP (45.5%), Newmont Goldcorp (45.5%) and Orano (9%). The three companies all divested their interests entirely to HPX and the Guinean government, which holds a 15% stake. HPX, owned by billionaire mining investor Robert Friedland, aims to jump-start the mine "very soon" with a production capacity of one to five million tons of iron ore and eventually expand to 20 million tons per year.
However, contrary to the Guinean government's preference, the company's interests are highly contingent on shipping the product by rail through Liberia's Port of Buchanan. For this, according to the Australian Financial Review, the Guinean government is imposing a tax of between US$0.825 to US$2, per ton.
Lowe believes that any mining operations in Guinea could take years to get off the ground. ArcelorMittal's own expansion plans, which have been long in the making, were upstaged by the Ebola crisis in 2014 as well as the drop in the price of iron ore on the world market. Now, back in the swing of active mining operations, the company hopes the Liberian government will focus on the "here and now", while potential mining operations are sorting themselves out.
"Ore being shipped from Guinea through Liberia wouldn't be the same economic benefit. And our project is here and now," Lowe asserts. "The mine is here today and we're working on our project now. Guinea is an opportunity for the future. Of course, you have to start planning for the future now, if there's going to be a better future; I understand that, we support that. But right now, for the people of Liberia, I think the best benefit will come from not only our existing mine, but the project we're working on right now.
"An important point to stress is that a ton of ore from Liberia creates Liberian jobs, Liberian royalties, Liberian taxes. A ton of ore from Guinea does none of those things. And that's many years away.
"Absolutely essential for this investment decision is the infrastructure, which is the rail and the port for that 15 million tons that we need reserved for us to underpin our investment decision," says Scott Lowe.
That being said, Lowe insists, ArcelorMittal's own expansion plans, if the Government of Liberia agrees, could be well in production by the year 2022, well before any iron ore interests in Guinea realize their need for access to the Liberian rail and port infrastructure.
"We've recently completed a feasibility study for the expansion and we've provided the government with a summary of the at feasibility study. Now we're doing detailed engineering and later this year we'll be assessing all the engineering and the additional detailed work that's being done," Lowe explains. "This is a project aimed at more than doubling the production of the mine and extending the mine life by 27 years. This will be an exciting thing for Liberia. An additional US$500 million investment would be required to do that. So, if the assessment is then approved and the funding decision is made, then we would be in production in 2022.
"We support the concept of having that rail corridor become a part of creating economic stimulation and development for the entire range -- that would be fantastic. What we are looking for is a win-win. And what we need in order to support our business case for a 25 year extension for our mine is we need the first 15 million tons. We're currently delivering 5 million tons. The rail needs to be upgraded and what we need to support our investment case to more than double the production of the mine and take what is currently like a 4-year mine life and turn it into a 27-year mine life; we need the first 15 million tons (including the additional 10), and we need to continue operating the rail.
"Beyond that, there are single-rail lines around the world that can take a lot more than 15 million tons. You don't have to duplicate the rail; you can put 50 million tons on that rail on a single line. And we would welcome the opportunity to cooperate with the government on how we would assist in that process.
"The win-win is that we get the capacity that we need, we get to continue to operate the rail for the first 15 million tons. And the additional capacity that can be built there, that would be great. It's quite common -- we own and operate rail lines with very big tonnages and multi-uses all around the world. Canada is an example. Multi-uses include the transport of other commodities [such as] bauxite, iron ore; you can have passengers or agriculture products. It can be a mix but, what people have been talking to us about is a multi-use of which is two iron ore companies sharing the same rail. We have no objection to that, provided that the first 15 million tons of the operatorship of the rail is for us. What we've shown is that we can operate high production, high capacity rail systems with multiple uses -- multiple companies using that in other countries and we'll be happy to cooperate in promoting economic growth and development for the entire region. That would be fantastic."